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If you are planning your life around putting money into assets tied to the imperial core e.g. housing and retirement how do you feel abt the entire financial system being a giant bubble (lemmy.ml)
submitted 1 year ago by [B] to c/asklemmy@lemmy.ml
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If you think this started with Silicon Valley that's a mistake

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[–] 2 points 1 year ago (5 children)

How would that not be part of supply? If productivity doubles and is rolled out across the board, wouldn’t supply double as well? I mean, the total work being done would probably drop such that the supply isn’t actually doubled, but if supply was the constraint before then wouldn’t it settle somewhere between that doubled amount and the original, directly translating that increased productivity into increased supply?

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  • [–] 1 point 1 year ago (4 children)

    Essentially, supply and demand meet each other, but that doesn't explain prices alone, why a chair sells for 100 USD while a car sells for 50,000 USD. What matters is the difference in resources needed to devote to create one, ie labor time and raw materials, as well as the extent to which machinery, ancillary materials, semi-finished goods, etc are used up.

    For a car, you use up far more of these than for a chair. A sudden influx of cars, say, by discovering a hidden trove, or a sudden decrease, ie a warehouse exploded, will have temporary distortions on price. However, this central, "natural price" is what supply and demand press towards over time.

    Further, since raw materials exist naturally, the difference in their value is driven by the labor required to extract them, refine them, etc. Each step in the process makes it more valuable, unless supply is kept artificially low or high. Further still, these are averages. If someone spends a lot of time making an equivalent chair, they aren't going to be able to take it to market for a higher price.

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  • [–] 2 points 1 year ago (3 children)

    Right, but I’m having some trouble connecting that summation of supply and demand to your implied disconnect between productivity increases and supply. Were you specifically talking about scenarios where there is no space for output to grow, only input to shrink?

    For instance, four people extract 1 ton of raw material in a day. A new machine means it only takes two people to extract that same 1 ton, but the size of the material patch stays the same so you can still only operate the one machine rather than using all four people to operate two machines. Thus increasing productivity without increasing “supply?”

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  • [–] 1 point 1 year ago (2 children)

    Kinda, not quite. Supply and demand naturally cover each other in societies at certain levels. Price is primarily determined by the cumulative labor that goes into it, including the previous labor for machinery, raw materials, etc. If the composition of said commodity raised in constant capital (machinery, raw materials, etc) while lowering by ratio in variable capital (labor), price generally lowers. The supply can increase or decrease, what impacted the value was the change in total labor time.

    In other words, supply and demand are best seen as averages that push and pull price above and below value. Productivity changes that value, which sets new supply and demand.

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  • [–] 1 point 1 year ago (1 child)

    Okay, after processing everything over the past few days, I think I understand how to shift my understanding of supply and demand. Previously I had thought of supply as “there is this much stuff to sell.” It would be better to view as “it costs X per unit to produce Y units at market.” So increased productivity can means producing more Y for the same X, or in the case of reducing labor like you said producing the same Y for a lower X. Demand can be thought of as “N units can be sold for Z currency each.”

    Unless you are in a monopoly, Y will always be a fraction of the N units actually sold, so as long as the Z of the total market is higher than your X to produce a profit is made. This is complicated by scenarios where company A sells their product at a different Z than company B, but this model allows for the changes to the supply side that don’t actually affect the total market Y.

    Does that make sense to you?

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  • [–] 1 point 1 year ago

    Kinda!

    The liberal idea is that supply and demand meet at price, and they try to obfuscate value by wrapping it up into supply. However, Marxist economics provides a more grounded and coherent answer, that value is the real center and that fluctuations in supply and demand merely bring price above or below value. Value is best represented as the socially necessary labor time to produce a commodity, and is what forms the basis of price.

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